Insurer Association Urges Veto of Calif. Punitive Damages Bill

The Association of California Insurance Companies (ACIC) is urging Governor Arnold Schwarzenegger to veto punitive damage recovery legislation that it says “makes no public policy sense from either a fiscal or legal perspective,” according to Jeff Fuller, ACIC general counsel and executive vice president.

The legislation, SB 832 by Sen. Don Perata, D-Oakland, would require by law that 75 percent of all punitive damage awards go to the state treasury rather than the victim.

“As a fiscal policy, the bill would burden certain defendants in civil actions with a new obligation to fund the operations of state government. As a revenue source, punitive damage awards would be both unpredictable and unreliable, thereby rendering rational fiscal planning illusory,” said Fuller in a letter to the governor.

From a legal perspective, Fuller said the bill would encourage larger punitive damage awards. That, in turn, would tend to increase the size of claims settlements, which would increase insurance costs. The split recovery scheme in SB 832 would damage California’s business climate, he said.

“Perception will become reality if businesses outside California make their decisions regarding location or expansion based upon a belief that punitive damage awards can run wild and be sources of revenue for a financially strapped state government,” Fuller added. “SB 832 is unfair, unreasonable and unsound public policy.”

The governor has until midnight Sept. 30 to either sign or veto the bill. It he does not act by the deadline, the bill becomes law without his signature.

The Association of California Insurance Companies (ACIC) is an affiliate of the Property Casualty Insurers Association of America (PCI) and represents more than 300 property/casualty insurance companies doing business in California.